Question

Sheffield Corp. uses the composite method and its composite rate is 7.5% per year, what entry should it make when plant assets that originally cost $134000?

Answer 1

Answer:

$ 142 375

Explanation:

Thinking process:

Let the composite rate be given by the formula:

$A = P (1+\frac{r}{n})^{nt}$

where

A = amount after interest

$\frac{r}{n}$ = interest rate

t = time

n = number of times (per year)

Therefore, this gives:

$A =134 000 (1+\frac{0.75}{12})^{1}\\ = 142 375$